Tuesday, March 23, 2010

What people mean when they say "High effective marginal tax rates"

Christchurch woman Cassey Quy, 29, quit her job in a flood of tears after three months.

As a single parent looking after her four-year-old son Riley, she gets $357 a week on the domestic purposes benefit (DPB), with some bills being paid by Work and Income.

Struggling to make ends meet, she took a part-time job as a laboratory assistant at Canterbury University in January.

After advice from a Work and Income case worker, Quy believed she would be better off by $100 per week.

However, her part-benefit, part-wage income left her $10 a week worse off.

After the Government changes were announced yesterday, Quy said she was scared she would fall back into debt.

“It doesn’t make sense, working but not earning money,” she said.

“It’s like the Government is punishing us.

This should be very high on peoples lists of things that are wrong with the world. Her work at the university was helping other people, even though she was doing it purely for her own reasons. That way, everyone wins. However, government has gotten in the way, and her incentives have been perversed so much, that she stopped producing her labour. Because of the government, she has had to take an action that benefited herself, to the detriment of everyone else.

Such extreme cases like this one should be the first thing to be fixed.

Don't listen to anyone who tells you producers will never stop producing.